Supermarket Shelf Space In : Quick Tips

By Earnsmart Business Kenya

©2020

By Earnsmart Business Kenya

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If you have ever tried to get shelf space you know how frustrating it can be. Often, Supermarkets act up with bureaucratic barriers and what seems like a dim view of your product.

But before you give up an understanding of the psychology of supermarkets will help. The view among startup manufactures and entreprenures is that if you are selling some products like food items – juices, sauces, cooking oil, water and the like you can’t afford to ignore the supermarkets.

As much as that is true, supermarkets especially the big ones, are not always the best of options, and practical, for a small trader without much working capital. The major reason being that supermarkets have some of the longest credit periods; ranging from 90 days to as long as 270 days for some. Are you able to comfortably operate for 3 to 6 months without getting paid?

The other drawback is that supermarkets will in a way squeeze your margins because they want the lowest prices possible. This is a big challenge if your products has low margibs . Of course the flip side, which is the advantage of having your products in a supermarket is that you move volumes, and consumers easily discover your products.

To compile the tips we talked to a number of supermarket managers, tried to place some products on the shelves, talked to enntreprenures with products on the shelves, observed and did our own research.

Let’s start with some dry facts about supermarkets:

✓ There are over 1500 supermarkets in Kenya ✓ alone has over 500 businesses licensed as supermarkets Supermarkets can be classified into a) Small Supermarkets occupying between a thousand and 2000 square feet b) Medium and large supermarkets occupying a bigger space and with over 50 employees. ✓ Five supermarkets dominate the market controlling about 30% of sales between them; these are: , , Naivas, Ukwala and Uchumi. Ukwala is on its way to being acquired by Tuskys. ✓ Medium size supermarkets tend to dominate in particular regions. Think of Maguna Andu and Maathai supermarkets in central region. Or Peter Mulei, recently rebranded as Mulleys in Machakos and Ukambani. ✓ In Nairobi medium supermarkets include the likes of Home Depot, Ebrahims, Chandarana Eastmatt, Cleanshelf and several others.

✓ Since 2015 supermarkets have had mixed fortunes. Uchumi almost went down due to mismanagement, while Ukwala and Nakumatt have reported losses. Ukwala has since

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sold a stake to Choppies from Botswana, while Nakumatt as of October 2016 is said to be shopping for a strategic investor.

Its important to note that supermarkets are becoming more powerful as more consumers choose them , rather than retail shops and kiosks, as their main venues. This means that they have more say in negotiating for prices and even what to place on the shelves and what not to.

Another recent trend is private labels , where supermarkets firms to package products under their own brands. Think Nakumatt Ice Cream, Crisps and so forth. This is usually in partnership with manufcureres. The significance of this is that private lables are more profitable to the supermarkets, and they are taking up more space which otherwise would have been allocated to other brands.

And now here are some practical tips to get your products on the shelves:

1. Just like you supermarkets are in it for the money. Forget the buy Kenyan; build Kenya jingles. Supermarkets have no obligation to stock your products simply because it’s made or distributed by you a Kenyan, or because you are a youth or a man or a woman. They make rational decisions based on their profit goals. This is unlike a country like South Africa where supermarkets should stock at least 40% from local producers.

2. Shelf space is limited so when a supermarket owner looks at a shelf vis a vis your product he crudely asks himself “Is this the most profitable product to occupy this space?”

Profit is not just in terms of direct margins but also customer satisfaction. Think of it this way you have a new toothpaste called Brushy that you want to supply to the supermarket. You offer a price that will make the supermarket a profit of Kshs. 20 per packet. Then there is Colgate which gives a profit of Kshs.10 per packet.

Why will the supermarket not jump at your more profitable Brushy and edge out Colgate? Simply because many consumers are aware of Colgate and trust it more, thus when they find it missing they wont go for unheard of Brushy rather they will shift their shopping to the next supermarket where they are sure to find Colgate and other familiar items. Margins are also important. A supermarket will definitely consider how much it’s likely to make vis a vis related products. However, to insist, the supermarket will not look at margins in isolation but in terms of volumes and consumer satisfaction.

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3. There are several factors which influence the amount of shelf space a product is allocated .For starters they give you a space according to the type of product. For example detergents, food etc . If the product is fast moving and visible you can get bigger shelf space since supermarkets wouldn't want the customer to miss a basic in demand brand. Space is also allocated according to the size of the product: the bigger the product the lesser the space, unless the product is a basic need.

4. Most entrepreneurs tend to focus on the large supermarkets, of course attracted by their wider reach. But a rule of the thumb is the bigger the supermarket the more the bureaucracy and conditions. However that should not discourage you from approaching them, do it, but don’t ignore the lesser supermarkets.

5. When going to pitch to a supermarket be clear who your target market is. And also show an understanding of the supermarkets target customers. For instance if you are making shoe polish packaged only in 20ml tins, it would be a hard sell in Nakumatt and Chandarana who target the upper middle and high class who prefer to do monthly shopping and thus go for medium and large quantities to last a month. On the other hand if you take the 20ml shoe polish to any of the 7 supermarkets in Kangemi, chances are high they will listen to you. As basic as it may seem understand your market. When you take the ‘wrong’ product to the ‘wrong ‘ supermarket they doubt you, they don’t take you seriously and even if you have another product they already have a dim view of you. Be sure who your target market is. This is not just in size but packaging, product choice, taste and so forth.

6. The process for allocation of a shelf space for new product starts from the retailer's headquarters where you fill some agreements and there are terms you should accept. Among this is the return rule, that is if the product expires on the shelf you will be issued a Goods Return Note (GRN) or if it gets damaged you sign the GRN and take the unwanted products.

There are other conditions before being accepted which include having a KEBS mark of quality, PIN and bar code. (See no.7)

If the product is accepted and approved at the headquarters, the branch managers get emails and then you start going round the shops supplying. Often you will be required to have a merchandiser to ensure he or she takes orders, signs GRN if any on your behalf and arranging your product on the shelf and brushing off the dust.

Retailers consider the brand visibility, demand and even, size and packaging: they reason the more attractive the package, the more likely a product will sell. (See 8)

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7. Medium and Large supermarkets require you to meet some basic conditions before even considering stocking your product. Some of the conditions are demanded by the law, while others are a way of maintaining standards and possibly eliminating nagging would be suppliers. These conditions are:

a) Your business must be fully registered with the registrar of companies. Supermarkets are reluctant to deal with fly by night informal businesses. So make sure your business is registered. It costs between Kshs. 5000 and Kshs.20000 to register depending on the kind of business; partnership, limited company etc and of course if you are doing it yourself or using a lawyer or broker. On average it takes about a month to get registered.

b) Your business must have a Kenya Revenue Authority pin number and also (Value Added Tax) VAT number. These are free to acquire from KRA. Many small businesses are reluctant to acquire these so as not to pay tax considering their poor cash flow. But hey if you want to join the big league then you have very few options but to be tax compliant, or at least pretend to be.

c) Your product must have a Kenya Bureau of Standards (KEBS) certification. The law demands it. But beyond the law a KEBS certification also it validates the quality of your product. As a new supplier you need all the validation and accreditation you can get. Also consumers are getting more informed and will tend to trust a product with KEBS certification as opposed to one without. Depending on your product or production process KEBS validation will cost between Kshs. 6000 and Kshs. 35, 000

d) Your product must have a Barcode. Though this is not demanded by all, it helps to have one. The point is to make sure the supermarket will have no immediate reason to turn you down. Let the barcode be the excuse. You can get a barcode from GS1 Kenya. See GS1KENYA.ORG

e) Your product must be well labeled. This will depend on the product but basics include having the manufacture’s name, expiry date, ingredients, quantity storage or instructions if necessary. Some of the labeling requirements are enforced by KEBS. But do it for your customers. For instance if you sell food products and you don’t include an expiry date or it’s very hard to locate it then customers will opt for the next substitute. Getting supermarket space does not mean your products will move. You need to entice customers to purchase.

8. Supermarkets want to stock products that will appeal to as many of their target customers as possible. To illustrate A lady who makes unique hand knitted baby booties was turned down by one of the leading supermarkets because , to quote a manager “ most of our customers prefer normal baby socks” . The so called normal

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socks are mass made in china and cost less than the hand knitted products. But they have flooded the markets and consumers have come to identify with them.

In other words the manager was saying “Yes you have products, but only few of our customers have a taste for them, and so if we allocate you space we will be shortchanging ourselves. See, our customers have some predictable tastes; they are used to some goods. Yours is a good substitute but it will take time before customers appreciate it. We don’t have all the time because our competitors are not sleeping. “

It’s a dilemma of sorts.

Supermarkets will be reluctant to take your product if it’s so similar in price and design to what is already stocked. On the other hand if it’s too radical in design or a novelty, for instance, they won’t take it either. Moderation could work.

Another lady who manufactures yoghurt went to talk to a medium sized supermarket. “Just look at the shelves “the manager said “We have over 20 brands of yoghurt, why should we stock another one? “ The lady is now trying to rebrand in taste and packaging.

Not even big suppliers are spared. One of them has narrated how after introducing a product in the market he had to wait for up to a year before one of the big five could take him in.

9. Most medium and large scale supermarkets don’t have a very clear mechanism or process of how a product gets approved for the shelves. And where it exists then the process is so ‘hidden’ that from the outside suppliers see a thick fog. Cases have been reported of bribery and profit sharing deals with managers so as to have a product accepted and keep it on the shelf. Sometimes it’s worth it, at others not. It all depends on you and your principles.

Would you pay Kshs. 50,000 to have your product on the shelves if the product gives you sales of Kshs.100, 000 every month? Would you share 20% of your margins with a supermarket manager so as to have and maintain your products on the shelves? Think about carefully. Also as yourself whether you have a back up plan in case a manager is sacked or leaves the supermarket for a reason or another. Again note this is not the norm but it happens in some cases so be prepared for it.

10. There are a few things that you could do to increase your chances of getting shelf space especially in the medium and large supermarkets:

A) Show that consumers are buying your product – If you have evidence that consumers are already purchasing substantial quantities of your product then it will be easier for the supermarkets to take you in , after all your product will be an easy sell as

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compared to a virgin product. Have clear and believable data if you can. Delivery notes, invoices, payments or any other production and sales documents.

This also means that the best strategy to get your product moving is to focus on customers directly. Depending on your budgets and product try reach as many customers outside the supermarket space as possible. Create some noise around your products and some of it will get to supermarkets and you will have higher chances of getting space. Don’t spend all your time pursuing supermarkets, explore other channels too. The noise you create could be through posters, promotions even near the supermarket, local advertisements, anything to give your product some visibility.

You can also use a down top strategy. Although your dream is to have your products in the medium and large supermarkets you can start with the smaller supermarkets. Due to less bureaucracy it’s relatively easy to get space in such. There is no guarantee that you will get but the chances are higher. In small supermarkets you can easily meet and pitch to owners directly or managers. For the large supermarkets it can take even 6 months to have a face to face meeting with a manager.

If you supply to enough of the smaller supermarkets you can use that to validate your product as you meet the big guys.

New entrepreneurs seeking to become supermarket suppliers sometimes pay people to go to an outlet and ask for the product they supply. Thus a man working for you the entrepreneur goes to a supermarket and asks the attendant “Do you have the Manly Man Hair food?”

He will make sure a manager is within earshot. He buys something else and when he is paying at the cashier complains about the lack of the hair food “And the way I wanted it “.

A few days later another hired repeats the same thing.

After a week you, the Manly Man Hair food supplier approaches the supermarket and the ride is easier since they anticipate demand. Of course this is a short term strategy. If your product is not good or you don’t support it by marketing then it will not fly from the shelves.

B) Say and show you are going to market – A supermarket wants you to support your product, not just dump it there and expect customers to purchase it. Show you have a marketing plan. Show you are doing some marketing already.

There are supermarkets which will demand that you pay upfront advertising and marketing fees. This is more so if your product is new. They will say they that for a new product a lot will be needed to push it to the consumers mind. The amounts demanded could be in tens of thousands or sometimes hundreds of thousands. In a way this is also to discourage suppliers who want to piggy back on supermarkets to market products for them free of charge. For others written plans of your marketing strategies are all that is needed.

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C) Proof Capacity – Supermarkets don’t want to take your product, place it on the shelves and when it becomes popular you have problems meeting the demand. Remember supermarkets fear disappointing customers because disappointed customers will go looking for the product in rivals stores and probably never come back. Using anecdotal evidence of your stock, production capacity or any other show you can meet demand. Remember supermarkets pay suppliers between 45 and 90 days so you might need more capital or growth financing.

Capacity is also in terms of logistics. Though some supermarkets will request you to take products to their main warehouse, others want you to supply individual branches. Show you can do that and on time.

In small supermarkets consignment selling works. This is where you convince the supermarket to stock your product, and if it does not sell within certain duration you will come pick it. If it sells then they pay you and continue stocking. A mattress manufacture has managed to convince tens of small supermarkets to stock his products under such an agreement, popping in only once every two months to check stock and see if there are any sales. He gives the supermarkets huge margins. This may not work for bigger supermarkets who value space more or if you have cash flow problems.

What determines whether a brand is placed at the top or bottom is if the product is large e.g.: 20litre oil, or 25kg bag of rice, is usually placed on the bottom shelves or near the floor for easier lifting since its heavy but products with less weight are placed on top shelves. Simply they are placed according to weight. The heaviest at the lower shelves

The position of the product in the supermarket will also have an influence on sales. If a product is allocated near the hardware or furniture or electrical be sure the sales will be poor since not many people go to the hardware area or the furniture area...but if its near the flour, rice, cooking oil all those basic needs, the sales will be high since its seen by many customers. A customer might say today I’m not buying Ranee rice let me try this new product. Also if the product is allocated near the cashier the better because as customers queue they tend to look around and if they see a new product they will be tempted to pick even if not budgeted for.

11. Supermarkets don’t reserve ‘empty’ space then. It’s not a good picture for a customer to find an empty shelf. If a product is in demand the line attendant with your merchandiser ensure they have ordered enough to be kept in the store. That is one of the main roles of the merchandiser; to be checking the store if there is enough for the following week and ensure they are well arranged and in plenty on the shelf.

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12. Generally its easier for basic need product like cooking oil, salt, detergents and washing soaps to get shelf space than for products like hardware, gym items etc. That said a supermarket can only hold as much and new relatively unknown products will relatively find it hard to get space. 13. If your product is fast moving and with a good sales margin,you automatically get a bigger shelf space from the retailer.

14. At the end you have to be patient, persistent and consistent. There are millions of products that want to be supermarkets. And with cheap imports flooding the markets through highly capitalized traders the small and beginner entrepreneur is finding it hard to get space in the supermarkets. Don’t expect quick results. Don’t trust supermarket personnel when they tell you to leave a sample they will call you back. Be persistent and try getting a face to face meeting with the responsible manager. Always carry enough samples and let the manager try the product if she so wishes. .

And if you they decide to stock your product. Read and reread the contract, especially parts about price. As much as you want to have your products in supermarkets don’t under price yourself. Supermarkets are low margin high volume outlets and they will always try to push you to the wall regarding price. Push back in a firm but reasonable manner.

Now go ahead and give it a shot. Don’t focus on the big guys only. Don’t focus on one chain only. Don’t spend all your time chasing space. Try being innovative in distribution. And very very important persist.

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